Universal Credit: Rent Arrears

Earl Cathcart Excerpts

Wednesday 13th July 2016 Lords Chamber

[Lord Freud]

The best evidence I have got at the moment is a gateway review, which shows that a rather high figure—48%—of the singles on UC have got arrears, but, interestingly, half of them were pre-existing arrears. That compares with 31%—so it is higher—but the interesting thing is how quickly it comes down. In the second wave—that is, three months later—it comes right down to very close to the JSA figure. There is a lot of complexity here; it is not straightforward at all. I am looking at it with some urgency.

[Earl Cathcart (Con)]

My Lords, during the passage of the recent welfare Act the Government were warned by several noble Lords from around the Chamber that, if they did not allow tenants to choose to have the rental part of their universal credit paid direct to their landlords, then rent arrears would increase. As the noble Lord, Lord McKenzie, has just said, arrears are increasing dramatically, but at the time the Government said no. Why can universal credit be paid directly to mortgage lenders for mortgage interest but tenants cannot choose to have the payment made directly to their landlords?

[Lord Freud]

What we are aiming to do with universal credit—and there is evidence of success in this—is to get people to take control of their own lives. It is much more difficult for people to switch to going into work if their rental situation is locked up in a dependency situation. We are aiming to free people from that so that they can move into work. There are good signs that we are being successful in getting people into work.

Welfare Reform and Work Bill

Earl Cathcart Excerpts

Wednesday 27th January 2016 Lords Chamber

[Baroness Meacher (CB)]

My Lords, in moving Amendment 82A I hope not to take up much of the House’s time. The amendment requires the Secretary of State to make regulations that would enable tenants receiving universal credit to choose to have the housing element of universal credit paid directly to their landlord.

We debated this matter in relation to an earlier welfare reform Bill and I am aware of the Government’s resistance to the measure. As benefit levels fall drastically under successive rounds of cuts, the need for this provision has grown over time. Until the introduction of local housing allowances, private tenants were able to choose to have rent payments paid direct to their landlord. Currently, social tenants can still request that housing benefit be paid direct to their landlord. However, under universal credit, tenants, whether social or private, will lose this flexibility and thus the opportunity to ensure that their rent is paid regularly so that they can at least be guaranteed a roof over their heads even if they cannot feed their children.

The Government argue that to include housing benefit payments within the universal credit payment promotes financial responsibility and helps prepare claimants for the world of work, when they will need to manage their entire budget without help from the state. Of course, in a perfect world this is a reasonable argument. However, it fails to take account of government policy to ensure that work pays. But this is being done by reducing out-of-work benefits substantially. The result is that it is highly doubtful that any of us in this House could manage to live on out-of-work benefits—pay the bills, feed the family and pay the rent. If we could not do it, why should we expect others far less privileged to be able to do so?

The Government’s attitude to this matter suggests to me, I fear, little understanding of the incredible challenges faced by out-of-work claimants under the regime which has been unfolding since 2010.

I wish to put on record in your Lordships’ House that tenant choice, as set out in the amendment, was supported by the Work and Pensions Select Committee in its report Support for Housing Costs in the Reformed Welfare System published in April 2014. The Select Committee suggests that such arrangements could be available at least for the first few years of a UC claim as a transitional measure. I hope the Minister will be able to respond to that proposal.

There is considerable support for direct rent payments to landlords if claimants request it. In February 2015, for example, the Northern Ireland Executive confirmed that landlords will be paid benefit directly to cover tenants’ rent. The Scottish Government have also indicated their wish to introduce such a provision. Both Shelter and Crisis support it, for obvious reasons.

An important point raised by the Residential Landlords Association is that direct payments will prevent an abusive partner using the rent money for their own purposes, an issue I had not thought of. Partners with a gambling or drink problem too often reduce their families to destitution. In fact, I was very familiar with such problems years ago, although they had rather gone out of my mind. This amendment would provide some protection for such families.

Finally, the Minister will be well aware that this is a big issue for landlords and hence for the adequacy of housing supply for benefit claimants. It seems that this is as powerful an argument for the amendment as the concerns about tenants. Quite simply, if landlords cannot be sure that the claimant will be able to pay the rent on time every time, they would be sensible not to rent their properties out to universal credit claimants. We already have an excess of demand for housing over supply. Does the Minister have an estimate of the expected fall in the supply of properties for rent for claimants in the coming years? Is the Minister concerned that research by the RLA earlier this year showed that 63% of private landlords with tenants on universal credit said that their tenants were in arrears with the rent? How many of those landlords will be willing to risk renting to benefit claimants again? In my opinion, only very few.

I very much hope that the Minister will be able to persuade the Secretary of State to take this amendment seriously in order to avoid a likely catastrophe in housing provision for universal credit claimants, and serious consequences for the children of the many parents who will be unable to cope. I beg to move.

[Earl Cathcart (Con)]

My Lords, as the noble Baroness, Lady Meacher, has just said, under the old housing benefit scheme the tenant had the choice of the payment going to him or directly to the landlord. The Minister said that, under the new scheme, the,

“position is for universal credit to be paid as a single monthly sum direct to the claimant; that is designed to mirror what would happen if the claimant was in full-time employment, when they would be responsible for managing their own funds and paying their own rent”.—[Official Report, 21/12/15; col. 2438.]

In an ideal world that is an excellent idea, but in the real world it invariably does not happen. As a landlord, I can foresee that when the tenant receives the universal credit, the temptation will be to buy the weekly shopping, petrol, clothes and so on, and by the time the rent becomes due there will not be enough money left, so the spiral of debt takes hold. But the Government are adamant that paying universal credit only to the claimant not only will work but does work. Is this experiment working as the Government say it is?

According to a survey conducted by the Residential Landlords Association, it is not. It found that of those private sector landlords who had tenants on universal credit, some 63% had tenants in arrears on their rent—a point just made by the noble Baroness. Of that group of landlords, 85% had contacted the Department for Work and Pensions to have the housing element of the universal credit paid direct to them after eight weeks of arrears, as is their entitlement. More than 57% of that group said that it had taken the department more than five weeks to respond to the request, which means that the landlord is already more than three months out of pocket. I understand that the problem is even worse for social housing, with nearly 90% of tenants in arrears. It is heartening that the Minister said in Committee that,

“we are doing a lot of work now with social landlords to get the problem under control”.—[Official Report, 21/12/15; col. 2437.]

At least my noble friend admits that there is a problem and that the new system is not working quite as planned. Much of this could have been avoided if the rent had been paid direct to the landlord.

In October 2012, a survey of more than 1,000 landlords carried out by the Residential Landlords Association and the Scottish Association of Landlords found that more than 91% of landlords were less likely to rent to tenants on benefits as a direct result of the decision not to allow payment of the benefits direct to the landlord. Not making the payment direct to the landlord is not helping the landlords and it is certainly not helping the tenants. All the evidence, backed by Shelter, Crisis and the Money Advice Trust, has been that paying it direct to the landlord was popular with tenants, as they were assured that their rent was covered before they decided how else to spend their money.

If the Government really want to make tenants,

“responsible for managing their own funds and paying their own rent”.—[Official Report, 21/12/15; col. 2438.],

what better way than the tenant asking for the rent to be paid direct to the landlord? To my mind, that is the height of responsibility for the tenant: to ensure that the roof over their heads is paid for before deciding how to spend any remaining money.

[Baroness Hollis of Heigham]

My Lords, I strongly support the amendment moved so ably by the noble Baroness, Lady Meacher. This is a real problem. The previous proposals that we were given, and the previous explanations that we wanted to model on the world of work, frankly belonged to a different planet. Those tenants, particularly in social housing, who need housing benefit are not those, for the most part, who are paid monthly. They very often are on ZHCs, have insecure or short-time jobs, or have fluctuating incomes week by week. That is topped up by universal credit. They want and need the security of a home in order to continue often to be able to find the jobs that they want, which would give them greater security. If they seek direct payments to the landlord, why does the Minister think that the Government and the DWP can second-guess what is in their best interest? Why not treat them as moral adults who can make their own judgment? The result that we are already seeing and beginning to worry about is, given the refusal to give alternative payment methods until after six to eight weeks’ arrears, and the time of processing that, we can be talking about debts of more than £1,000, from which tenants never recover.

The alternative is to try to help tenants to find ways to bypass the rigidity of DWP. So we are busy setting up jam-jar accounts and other friends are busy trying to use credit unions in order to bypass the total universal credit going into the bank account where the bank then takes payments for any other outstanding debts or anything else. As a result, HB becomes the last thing to be paid to the landlord. Many are already experiencing those problems. Certainly, one local authority tenant said to me, “Well, I won’t worry about that because that will be the last thing that gets paid. The local authority won’t evict me. It costs them more to send me into temporary housing and, given that I’ve got kids, I can run that risk”. That is the mental framework. She said, “I would be perfectly willing if they took it at the beginning of the month. But if I put it in the bank, it will be gone by the end of the month before I pay the rent”.

I suggest that the Minister responds very positively to this amendment. Where the tenant seeks it, the department should agree that alternative payment arrangement and stop all the futile effort that so many of us are making trying to find ways to loop around the system, to overcome the rigidities of the department, to help tenants avoid what will probably be debts from which they will never recover. I hope that the Minister will take the words of the noble Baroness and the noble Earl very seriously. It is a real problem on the ground.

Welfare Reform and Work Bill

Earl Cathcart Excerpts

Monday 21st December 2015 Lords Chamber

Moved by

[Earl Cathcart]

104B: After Clause 20, insert the following new Clause—
“Power to supply relevant social security information to accommodation provider
(1) The Secretary of State, or a person providing services to the Secretary of State, shall have power to supply information relating to any relevant social security benefit to a person who provides accommodation to the claimant for the relevant benefit so long as the claimant has given written authority for the provider of the accommodation to receive such information.
(2) “Relevant social security benefit” has the same meaning as in section 121DA(7) of the Social Security Administration Act 1992 (interpretation of Part VI).”

[Earl Cathcart (Con)]

My Lords, the three amendments in this group all relate to private landlords, who now account for 4.2 million properties for rent and more than half of all rented properties. However, as of August, less than a third of all housing benefit claimants lived in private rented accommodation. Why so few? Why is there this bottleneck deterring private landlords from taking on benefit claimants? As a landlord, I have claimants in my properties, but it is not made easy. Given the choice of a couple in work or a couple on benefits, for the landlord it is a no-brainer. Why take the risk, the hassle and the uncertainty of renting to the couple on benefits?

As the rental market tightens due to increased demand, it is important to encourage and support private landlords to house those in receipt of universal credit so that they can access accommodation, otherwise they will find themselves at the back of the queue. These amendments explore ways to do just that.

The first amendment is about giving the power to give the relevant universal credit information to the landlord. Landlords need assurances that tenants have the funds available to pay their rent. Without these, renting to them becomes a risky business. Currently, the private landlord can get no information about the amount of universal credit and when it will be paid. For those tenants in work, landlords will always ask for references from employers to establish their income to ensure that the funds are available to cover the rent. Surely it must be common sense for landlords to be able to do likewise for those in receipt of benefits. I understand that social landlords are able to gain such information, so why not private landlords? Surely what is good for the goose must be good for the gander. I acknowledge that it is quite difficult to find out how much benefit will be available before the tenant moves in, but it is not beyond the wit of man to publish a ready reckoner to help everyone see where they stand, according to each local housing area’s allowances.

Amendment 104B would insert a new clause to ensure that there is a legal power, where the tenant provides written consent, for the Department for Work and Pensions to disclose to all landlords information on the housing element of the tenant’s universal credit, including the amount, or approximate amount, and when it will get paid.

The second amendment relates to rent arrears. As benefit claimants may often move home, including to seek work, landlords need the security of knowing that tenants in receipt of benefit cannot simply stop paying their rent and leave their property. Currently, rent arrears can be recouped where a benefit claimant is still living in the house to which the arrears apply. There is, however, little or no opportunity for the landlord to recoup when such tenants move house, unless they are prepared to go through a lengthy and costly court process.

I cannot see the logic in allowing the landlord to recoup the arrears if a tenant is still in the landlord’s property, but not if the tenant has moved. I realise that there will probably be a hierarchy of deductions that can be made from future universal credit—no doubt future rents, council tax, utility bills, et cetera, would come first—but if even only a percentage of the arrears was paid each month, it would act as a disincentive to tenants to rack up the arrears in the first place and ensure that the landlord was not left high and dry once the tenant had jumped ship. Amendment 104BA would insert a new clause requiring the Secretary of State to make regulations to ensure that rent arrears follow a tenant in receipt of universal credit and that landlords affected have a clear route to reclaim lost rent in such circumstances.

The third amendment concerns making payment of the housing element of universal credit direct to the landlord, with the written consent of the tenant. It is vital that landlords have full confidence that they will be paid in full and on time if vulnerable tenants are to have access to the rented homes they need. This is especially important since the Government took away the option for tenants to ask that the housing element of universal credit be paid directly to the landlord, as was formerly allowed under housing benefit. At first, I thought that that omission was an oversight, but I now understand that the Secretary of State wants all the money to be paid to the tenants so that they learn to become responsible for managing their money—a great idea but, sadly, I do not think it is working.

A survey conducted this year by the Residential Landlords Association found that of those private sector landlords who had tenants on universal credit, 63% had tenants in arrears on their rent. Of this group of landlords, 85% had contacted the Department for Work and Pensions to have a tenants’ housing element of universal credit paid directly to them after eight weeks of arrears, as is their entitlement. More than 57% of this group said that it had taken the department more than five weeks to respond to the request, with all the consequent difficulties this caused the landlords in not getting paid.

I understand that the problem is even worse when one looks at social housing. A survey carried out by the National Federation of ALMOs and ARCH—the Association of Retained Council Housing—found that nearly 90% of council house tenants in receipt of universal credit are in arrears. I had to look that up again: I could not believe it, but apparently it is so.

[Baroness Hollis of Heigham]

I declare an interest as a former chair of both a local housing committee and a housing association. Given that universal credit is paid at the end of the month and this might not be coterminous with housing associations or social housing, what does the noble Lord regard as an arrears? Is he talking about more than eight weeks’ failure to pay the rent, because five to six weeks might simply be the failure to co-ordinate payments, given the move, unfortunately, to monthly payments?

[Earl Cathcart]

I think that I caught the noble Baroness’s question. I do not think it is after eight weeks: I think it is in arrears—that is, they have not paid the monthly rent on time and they have not paid the next month’s rent on time, et cetera. I hope that that answers the noble Baroness’s question.

[Baroness Hollis of Heigham]

I meant that the arrears might simply be a technical cash-flow issue, and not a legitimate arrear, because if, for example, the rent is due before the payment of universal credit, there will be a period when there will be arrears. The noble Earl will understand my point, but the arrears that matter are the arrears that become irrecoverable, which usually, in my experience, means eight weeks.

--- Later in debate ---

[Earl Cathcart]

Yes, I imagine that it is before the eight weeks as well. As I said, I found the figure of 90% to be quite extraordinary, so I do not believe that it is working in the social housing sector either. All this could have been avoided if the rent had been paid direct to the landlord.

In addition, in October 2012, a survey of more than 1,000 landlords carried out by the Residential Landlords Association and the Scottish Association of Landlords found that more than 91% of landlords were less likely to rent to tenants on benefit as a result of the decision not to automatically make the payment of the benefits direct to the landlord. Not making the payment direct to the landlord is not helping the landlords and not helping the tenants; indeed, all the evidence backed by Shelter, Crisis and the Money Advice Trust has been that paying it direct to the landlord was popular with tenants. They were assured that their rent was covered before they decided how else to spend their money.

I believe that in Northern Ireland the benefit is to be paid direct to the landlords, as, too, in Scotland. Therefore, why not in England? Amendment 104BB would give tenants the free choice to have the housing element of their universal credit paid direct to their landlord. I hope my noble friend will look favourably on these three amendments, and give landlords, tenants and, indeed, me an early Christmas present. I beg to move.

[Lord Best (CB)]

My Lords, I support Amendment 104B in the name of the noble Earl, Lord Cathcart, to which I have added my name. This would empower local authorities and the DWP to give landlords details of entitlement to housing benefit—in future to the housing element in universal credit—where a prospective tenant gives written consent for this information to be imparted. In parallel to efforts to come down heavily on so-called rogue landlords, the Government should try wherever possible to be supportive of good landlords, of which there are, thank goodness, plenty of examples. The nation needs a strong, responsible private rented sector. Legislation should surely be supportive of those willing to invest in decent rented housing, perhaps particularly in rural areas, where some large landowners often act in a similar way to a local housing association.

However, we know that many landlords are nervous of offering a tenancy to those on low incomes who could have difficulty paying the rent, particularly now that welfare reforms have diminished benefit support for these households. Landlords who want to do the right thing, who charge reasonable rents and who are keen to help those in their local communities should not be deterred; they can be reassured that prospective tenants have an entitlement to universal credit and can afford to take on a tenancy, so long as those responsible for administering benefits are willing to explain the position. If officials administering benefit do not feel able to discuss an individual case—even where, as in the amendment, the individual gave written consent for this—I commend the idea that they be required to share enough information with each landlord to enable them to make an informed decision.

Perhaps I could also stand in for my noble friend Lady Meacher and add support to Amendment 104BB, which is also in the names of the two noble Earls, Lord Listowel and Lord Cathcart. This also addresses a new barrier to private landlords accepting low-income tenants. It calls for the facility for payment of the housing element in universal credit to be made direct to landlords where the tenant requests it. I know the Minister was able to give some reassurance on this score to councils and housing associations by ruling that direct payments should be made easy where a tenant is eight weeks or more in arrears, and also by allowing direct payment of rent from day one for the most vulnerable tenants. However, a lot of private landlords will simply not let to anyone on benefits—that is, in receipt of the housing element of universal credit—if there is the prospect of an eight-week loss of rent before a tenant’s request for direct payment can be activated. For the private rented sector, direct payments seem sensible from the perspective of tenants as well as all those who want to encourage private landlords to be helpful and supportive to those in receipt of benefits. I support these amendments.

--- Later in debate ---

[Lord Freud]

I will not resist the temptation of pointing out that there is no such thing as a bedroom tax; it is the removal of the spare room subsidy, and I will be answering a Question on that tomorrow. Interestingly, the direct payments project provided a lot of insight into this issue. It started off with direct payments and then people started taking on the removal of the spare room subsidy as well. I will try to find the precise figures for the noble Baroness, as I am speaking slightly from memory. We found that the people who had learned how to go through the direct payment process were able to handle the removal of the spare room subsidy more efficiently than others. I will aim to get the noble Baroness chapter and verse on that.

[Earl Cathcart]

My Lords, I am disappointed by my noble friend’s response to these three amendments. He seems to have said no to all three of them and I find that very disappointing. I do not think he has said anything this evening that has given any encouragement to private landlords to take on people who are on universal credit. In fact, he has probably reinforced the idea that one should not take on people who are on benefits, but that is not what my amendments are trying to do; they are intended to get people on benefits to go into private rented accommodation. I do not think that my noble friend has helped at all this evening, but I will read what he has said more carefully tomorrow or over the holiday period. At this stage, I beg leave to withdraw the amendment.

Amendment 104B withdrawn.

Welfare Reform and Work Bill

Earl Cathcart Excerpts

Tuesday 17th November 2015 Lords Chamber

[Earl Cathcart (Con)]

My Lords, this is the first time I have spoken in a welfare Bill. What caught my eye was the clause on social housing rents, under which the social housing sector, which provides affordable housing, must reduce rents by 1% a year for four years. My initial response was that it might cause some controversy, but I see that the social housing sector has increased its rents by 20% since 2010, which is more than double any increase in the private landlord sector. As a private landlord, I do not see how the social housing sector managed to get away with that. It is unfair on its tenants and, indeed, the taxpayer, who has to pick up the tab for these increases—so much for affordable housing. I support this measure.

Private sector landlords play an increasingly important role in the rented housing market. The number of properties rented by private landlords has doubled in the past 10 years and they now account for 4.2 million properties for rent, more than half the total rental stock. Private sector landlords also play an increasingly important role in housing those in receipt of benefits. According to Department for Work and Pensions statistics, as of August, around 32% of all housing benefit claimants lived in private rented accommodation.

As the market tightens due to increased demand, it is important to encourage and support landlords to house those in receipt of universal credit so that they are able to access accommodation, otherwise they will find themselves at the back of the queue. It is vital that landlords have full confidence that they will be paid in full and on time if vulnerable tenants are to have access to the rented homes they need. This is especially important since the Government took away the option for tenants to ask that the housing element of universal credit be paid directly to the landlord, as was formerly allowed under housing benefit, even though many tenants want to do this. In October 2012, a survey of more than 1,000 landlords carried out by the Residential Landlords Association and the Scottish Association of Landlords found that more than 91% of landlords were less likely to rent to tenants on benefits as a result of the decision not automatically to make payment of the benefit direct to the landlord, even when a tenant reaches eight weeks’ worth of rent arrears. It would be good if the Government brought forward an amendment allowing the housing element of universal credit to be paid directly to the landlord. That is my first point.

There are two other measures that should be included in the Bill to assist with giving landlords the confidence they need. The first is that landlords need information on payment of universal credit. Landlords need assurances that tenants have the funds available to pay their rent. Without these, renting to them becomes a risky proposition. Currently, private landlords have no information about the level of payment of universal credit to tenants or about when it will be paid. To provide confidence to a landlord, tenants should be allowed to give their consent to their landlord accessing a limited amount of information to confirm that a universal credit claim has been made and to check the status of that claim. I understand that social landlords are able to gain such information, so why not private landlords? For tenants in work, landlords always ask for a reference from employers to establish their income to ensure that funds are available to cover the rent. It must surely be common sense for landlords to be able to do likewise for those in receipt of housing benefit. I hope that in Committee the Government will bring forward an amendment that will ensure that there is a clear legal power, where the tenant provides written consent, for the Department for Work and Pensions to disclose to a landlord information on the housing element of a tenant’s universal credit claim, including the amount and when it is paid.

My last point concerns universal credit claimants’ rent arrears. As benefit claimants may often move home, including to seek work, landlords need the security of knowing that tenants in receipt of universal credit cannot simply stop paying their rent and leave their property. Currently, rent arrears can be recouped where a benefit claimant is still living in the house to which the arrears apply. There is, however, little or no opportunity for landlords to recoup them when such tenants move house unless they are prepared to go through a lengthy and probably costly court process. It is important that measures are put in place to give landlords more confidence that they will not be left facing rent arrears. Knowing that the landlord could recover rent arrears from an ongoing universal credit claim, even after a tenant has left the property, would be a strong disincentive for a tenant to rack up arrears in the first place. I hope the Minister will bring forward a measure in the Bill that will ensure that rent arrears follow a tenant in receipt of universal credit, and that landlords affected have a clear route to reclaim the lost rent in such circumstances. I hope the Minister will look favourably on my three points, but I shall not hold my breath.

Housing: Underoccupancy Charge

Earl Cathcart Excerpts

Tuesday 22nd July 2014 Lords Chamber

[Lord Freud]

This report was based on evidence from last autumn and we have had data since then that show that people are adapting. The numbers affected are falling and are now down 70,000 people; arrears have fallen in the past two quarters and rent collection remains for the Homes and Communities Agency for the social sector at 99%; homelessness numbers are reducing and are down 7% on the year. As for DHPs, we had a quarter of a million payments last year to people affected by this policy and we had £20 million returned to us unallocated. Finally, the Court of Appeal has upheld the Government’s position that DHPs are the proportionate remedy for looking after people with problems from this policy.

[Earl Cathcart (Con)]

My Lords, as a landlord I recall that the last Labour Government brought in this very same measure for the private rented sector. So why is Labour making such a fuss now—with the Liberals apparently jumping on the bandwagon—when all this Government are doing is rolling out to the public sector what Labour did in government to the private sector?

[Lord Freud]

My Lords, the private sector had the LHA introduced, as my noble friend pointed out, by the previous Government. We had to take steps to constrain the spending on that. We have taken £2 billion out of that benefit for savings. The results of that also came out last week. The final report was dramatically less in its impact than the predictions that we had. Instead of landlords pulling out of the market, they have increased their supply by 7%. There has been very little evidence of displacement; a very marginal probability of moving home; and again we have had homelessness acceptances coming down. We are on the same trajectory with the spare room changes as with the LHA changes.